I don't write a lot of what I consider "shameless self-promotion" articles, but I think that a mortgage company completing its 3rd year in existance given current market conditions is a great testament to the quality people I work with, to their dedication, and to their perseverence. We held an anniversary celebration event last Thursday, which was attended by over 75 prominent attorneys, realtors, and financial planners. I was asked to give a speech about the market and our company at that event, and the following is what I presented:
It's difficult to argue that the past 12 months has not been a challenging time in the real estate and mortgage industries. Declining markets, foreclosures, stiffening loan qualifications, erratic interest rate fluctuations and program eliminations are just a few of the hurdles we have overcome recently, and it is possible that we may see more difficulty before things get easier.
Presently, lenders have taken great strides to reign in excessive lending, and while this has caused many loans to be declined, it is improving the quality of newly written loans significantly. Initially through "Declining Markets" policies, now through revised lending guidelines and tighter mortgage insurance availability for weaker loans, lenders have cut back average maximum financing by 5% Loan-To-Value for most conventional loans. Higher credit score requirements have also impacted the availability of financing. Consequentially, for buyers with a 660 credit score and verifiable assets and income, while 100% financing was available as of last October, their conventional borrowing ability is now limited to 95%.
Foreclosed properties also represent a challenge in today's market, however, not to the degree that might be anticipated. From an appraisal perspective, there are two separate markets active today: the regular market, and the foreclosed market. This is beneficial to buyers and sellers of non-foreclosed properties, as comparable sales are available to support the higher value that an unblemished property carries. From a home-purchase standpoint, foreclosed homes represent a tremendous opportunity to first time homebuyers who had previously been unable to purchase due to exorbitant prices. These buyers will find great equity in their homes as they convert foreclosed properties into vibrant, occupied dwellings.
If a good credit score was important in 2006, in 2008 it is vital. Subprime mortgages allowed access to credit for home purchases for buyers with very little positive credit, and scores as low as 500. Current qualification minimums have risen to a 580 credit score for any loan, and as much as a 720 score to receive best possible rates. Documentation requirements for income and assets have become more thorough, as well.
Interest rates have been more difficult to predict in 2008 due to the high degree of uncertainty in capital markets. Long-term interest rates, such as those for mortgages, are directly affected by Wall St. expectations of future inflation and short-term rates. At present, the US economy is on a knife's edge between excessive inflation (a rate increaser) and languid growth (a supporter of lower rates). While 1st quarter GDP was revised upward to 1% today, that represents a very low level of growth, and 2nd quarter GDP is expected to be much more insightful when that information is made available in late July.
There are many different perspectives regarding the presence of a recession in the US. Opinion regarding Rhode Island is much more unified, suggesting we are, and have been, in recession for some time. Unemployment was recently measured at 7.2%, beginning to rival perennial leader Michigan's 8.5% rate. The state budget crisis also promises to present future difficulty.
Province Mortgage Associates is uniquely suited to face the challenges we as an industry, and as a nation are facing. As a Mortgage Broker, we are not limited to the programs of any one lender, and are financially independent from all of them. Should one lender fail, or merge, we have established relationships with over 50 wholesale mortgage lenders, from small niche-market lenders such as Franklin American Mortgage and Guarantee Bank Mortgage, to national powerhouses Chase, FlagStar and SunTrust. This provides us access to thousands of programs, several of which my colleague Rhonda Mulligan will review with you shortly. Because of our financial independence to these lenders, a problem at one of them merely represents an opportunity with another.
Province Mortgage Associates is rare among local Mortgage Brokers in the experience and training of its Mortgage Advisors. We have over 100 years mortgage experience on staff, and have two Mortgage Advisors who have completed MBAs. Among our full-time staff, we count Spanish, Portuguese, Italian, and French as languages in which we do business. Our prestigious location at 10 Davol Square is the type of office that will make you proud to close your buyers and sellers transactions at our office well into the future. Integrity is more important to us than closings; we have passed on a number of deals this year that did not meet our standards for loan quality.
Compare Province Mortgage Associates to other mortgage sources you have known in the past, and you will know the advantages we offer. From program selection, to financial independence to knowledge and experience, Province Mortgage Associates has the attributes necessary to deliver lending excellence with integrity and commitment.
Here's looking forward to many more successful years!
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